Elon Musk's ambitious xAI Terafab project has shifted from concept to active procurement, with teams from the Tesla and SpaceX joint venture contacting major chip equipment manufacturers Applied Materials, Tokyo Electron, and Lam Research for price quotes and delivery timelines. According to a Bloomberg report on April 16, staff requested estimates on a holiday Friday to be delivered the following Monday, with representatives stating the project needs to move at "light speed" and offering to pay considerably above quoted prices for priority.
The outreach covers a wide range of chipmaking tools, including photomasks, substrates, etchers, depositors, cleaning devices, and testers. This marks the first concrete indication that the $25 billion joint venture, unveiled by Musk in March 2026 as "the most epic chip-building exercise in history," has entered the planning phase. No formal orders have been placed yet, and suppliers are reportedly being given minimal information about the specific products to be manufactured, reflecting the project's early stage.
The Terafab project aims for a vertically integrated facility combining design, fabrication, packaging, and advanced logic under one roof, targeting one terawatt of annual AI compute output—roughly 50 times current global AI chip production. The first milestone is a pilot line capable of processing 3,000 wafers per month, with silicon chip manufacturing targeted to begin by 2029. The chips are intended to power Tesla's Full Self-Driving stack, Optimus humanoid robots, and SpaceX and xAI space infrastructure.
Intel joined the initiative as a foundry partner on April 7, contributing its advanced 18A process node. However, the project faces industry skepticism. Samsung Electronics declined to join directly when approached, instead offering to allocate more production capacity at its Taylor, Texas facility. Analysts have raised concerns about the project's scale and cost. Bernstein Research estimated the true capital required to hit the one-terawatt target at approximately $5 trillion, far exceeding the stated $25 billion budget.
Concurrently, Tesla's aggressive recruitment drive in Taiwan for experienced semiconductor engineers for advanced AI chip roles has raised investor concerns about escalating capital spending. Analysts estimate a full-scale fab ecosystem could require tens of billions in upfront investment, with some projections exceeding $60 billion. Reports suggest per-wafer production costs at Terafab could be 30% to 50% higher than leading foundries like TSMC, raising questions about long-term pricing efficiency.
For the cryptocurrency market, the Terafab buildout signals intensified competition for high-end semiconductor fabrication capacity. As analysts note, both AI compute and Bitcoin mining are industrial-scale races for the same underlying semiconductor resources. The winner in AI chip supply will increasingly determine which AI players can scale and which crypto mining operations can remain cost-competitive, linking the fortunes of these two sectors through shared infrastructure constraints.
